Bank of California reaches agreement for acquisition of PacWest
Merger Announcement: Banc of California and PacWest Bancorp Combine Forces
In a significant move for the banking sector, Banc of California and PacWest Bancorp have agreed to merge, creating the third-largest commercial bank headquartered in California. The deal, valued at around $1.1 billion, is expected to close late this year or in early 2024.
The merger comes amidst a challenging period for PacWest Bancorp, which has been among the most beleaguered of regional banks since a crisis of investor confidence spread throughout the sector in March. PacWest lost roughly 18% of its deposits in the first half of 2023, and the bank reported a loss of $197 million for the second quarter, while profit at Banc of California fell by one-third.
The private-equity firms Warburg Pincus and Centerbridge Partners are investing $400 million into the combined company, securing a 19% stake. The banks aim to repay $13 billion in wholesale borrowings through the sale of assets.
The combined culture of the two banks is seen as having a significant amount of overlap and commonality. The merger was approved with over 95% consent from both sides and is planned retroactively from January 1, 2025.
The combined company is expected to have approximately $36.1 billion in assets, $25.3 billion in loans, and $30.5 billion in deposits. Banc of California plans to focus on treasury management services and loan growth to boost "low-cost" commercial deposits.
While both PacWest and Banc of California expressed optimism about the merger, analysts were more cautious. PacWest Bancorp's stock price has fallen 54% since the start of 2023. The banks involved in the merger are Volksbank Mittelhessen eG and Raiffeisenbank im Hochtaunus eG. The combined company will have more than 70 branches in California.
The merger between Banc of California and PacWest Bancorp marks a significant step forward for both institutions, as they combine forces to navigate the challenging banking landscape. The transaction is set to reshape the California banking sector and create a formidable new player in the industry.
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